Backdoor Roth w/simultaneous transfer of pre-tax IRA balance to 401(k)

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frankandbeans
Posts: 30
Joined: Wed Feb 06, 2019 10:55 am

Backdoor Roth w/simultaneous transfer of pre-tax IRA balance to 401(k)

Post by frankandbeans » Tue Jan 14, 2020 10:52 am

For many years I have had a pretty big tax deferred traditional IRA, which has prevented me from doing a backdoor Roth because I didn't want to have a taxable event on the large tax deferred IRA balance.

I have only just now had the revelation that I can transfer my tax deferred traditional IRA balance into my 401(k). Since that will zero out my tax deferred IRA balance, I will then be able to do backdoor Roths at will. What I want to make sure is that there is no problem to doing it now, including with after-tax traditional IRA contributions for 2019 and 2020. So here is the timeline I'm planning on:

February 1: Complete transfer of tax deferred traditional IRA balance to 401(k). So traditional IRA will have 0 balance.

March 1: Contribute $6000 after-tax to traditional IRA for 2019. Contribute $6000 after-tax to traditional IRA for 2020. Backdoor all $12,000 into Roth IRA.

Will these steps pose any problems when it comes time to filling out form 8606 for 2020? Appreciate any wisdom folks can share.

GenawithanE
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Joined: Mon Aug 26, 2019 11:14 pm

Re: Backdoor Roth w/simultaneous transfer of pre-tax IRA balance to 401(k)

Post by GenawithanE » Tue Jan 14, 2020 11:04 am

I did the same thing seven years ago. Didn’t have any problem or questions.

bryanm
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Re: Backdoor Roth w/simultaneous transfer of pre-tax IRA balance to 401(k)

Post by bryanm » Tue Jan 14, 2020 1:39 pm

Seems fine to me. My understanding is that you can do the Roth conversion ("backdoor") so long as your trad IRA balance at the end of the relevant tax year is 0. In you scenario, conversion happens in 2020 (it always happens in the current year). At the end of 2020, your trad IRA balance will be 0. Should be all good.

Topic Author
frankandbeans
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Re: Backdoor Roth w/simultaneous transfer of pre-tax IRA balance to 401(k)

Post by frankandbeans » Tue Jan 14, 2020 2:31 pm

Sweet. Thanks for the feedback!

livesoft
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Re: Backdoor Roth w/simultaneous transfer of pre-tax IRA balance to 401(k)

Post by livesoft » Tue Jan 14, 2020 2:35 pm

Don't forget to also convert any gains that the $12,000 you contributed to a non-deductible traditional IRA to your Roth, too. The gains may appear after your first conversion.
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Duckie
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Re: Backdoor Roth w/simultaneous transfer of pre-tax IRA balance to 401(k)

Post by Duckie » Tue Jan 14, 2020 7:55 pm

frankandbeans wrote:March 1: Contribute $6000 after-tax to traditional IRA for 2019. Contribute $6000 after-tax to traditional IRA for 2020. Backdoor all $12,000 into Roth IRA.
You don't "backdoor" into the Roth IRA, you convert.
Will these steps pose any problems when it comes time to filling out form 8606 for 2020?
You will file Form 8606 for the 2019 contribution with your 2019 taxes. Since the conversion will happen in 2020 the 2019 form will be limited to lines 1, 2, 3, and 14.

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